Just a week after becoming PM Julia Gillard announced a complete back down on the Resources Super Profits Tax (RSPT). Billions of dollars of concessions were made to the three big mining companies; BHP Billiton, Rio Tinto and Xstrata. Delighted with the windfall, the mining giants decided to call off their $100 million anti-government advertising campaign.
At the behest of the chiefs of industry the RSPT was replaced with the Minerals Resource Rent Tax (MRRT). The new proposal includes a reduction in the headline tax rate from 40% to 30%, and the tax will only apply to iron-ore and coal projects.
Under the RSPT, the new tax would have kicked in when the profit rate exceeded 5% or 6%, while under the MRRT the threshold will be around 12%. The MRRT will also only apply to existing ventures as opposed to the RSPT, which would have been applied retrospectively. The mining companies will be involved in developing the finer details of tax so it is likely that even more changes will be made in their favour.
While the government estimated that these concessions would mean a $1.5 billion reduction in expected revenue, many commentators have suggested that the short fall could be as much $3.2 billion in the first two years. Goldman Sachs suggested that the mining giants would be $35 billion better off over the next decade!
When Kevin Rudd first proposed the RSPT the mining companies responded with a ferocious campaign. They threatened a strike of capital and job losses if the plan went ahead. Subsequently their campaign helped create the conditions for Rudd’s downfall.
Even though Rudd had pledged to put some of the money raised towards mining infrastructure, the companies were not happy about the idea that they would be funding a lower corporate tax rate across the board. Gillard’s concessions mean that instead of the planned 28% company tax rate it will be lowered from 30% to 29%. Either way this puts Australian company tax rates at very low levels.
Rudd clearly lost the public debate to the mining giants. The main reason he was unable to convince workers about the need for the tax was because he was unable to show how it would benefit ordinary people. For example not one cent would have been used to fund the important areas of health, education or public transport.
Despite lower than expected revenues, Julia Gillard and Treasurer Wayne Swan have said that they are still committed to returning the budget to surplus by 2012. If this is to be the case we can be assured that they will be looking to make cuts elsewhere in order to make up the difference. Welfare and other parts of the public sector will be on the hit list.
While the mining companies are supportive of the government returning the budget to surplus, they want their profits to be left in tact. They would prefer that the government move more quickly towards implementing austerity measures aimed at ordinary people. As far as big business is concerned it should be workers, not bosses, who pay the price for the economic crisis.
Gillard may claim that she has turned around Labor’s electoral fortunes by caving in to the mining companies, but there is nothing in either the RSPT or the MRRT for working people. Instead of taking from the rich to give to the poor, both versions take a little from the super-rich to give to the rich!
Gillard’s cave in has shown that Labor’s interests lie solely with the big end of town. While organisations that represent workers, students, welfare recipients and the environment are locked out, the Labor Party’s doors are wide open to big business. This is just another reason why ordinary people need to campaign for a new party that represents the interests of people, not big business profit.